After an Era of Austerity, What is Left to Cut?
Sian Norris digs into the data on a decade of cuts, assessing its impact on people and public services, as Chancellor Jeremy Hunt lines up Austerity 2.0
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Tax rises and spending cuts are expected to be the order of the day when Chancellor Jeremy Hunt announces his autumn statement on Thursday. The new Government is attempting to undo some of the damage wreaked by Liz Truss’ brief premiership, which tanked the UK economy in September, and to help calm inflation which has now reached 11.1%.
Much has been made of the ‘fiscal black hole’ that Hunt is hoping to fill – but the hole’s existence is itself contested. A report by Rob Calvert Jump and Jo Michell for the New Economy Forum argues it is a “dangerous fiction” and the result of Government accountancy rules and highly uncertain forecasts, not tax or spending decisions.
The economists suggest that “reversing a decision to exclude the Bank of England’s debt from the Government’s own debt figure, made in January 2022, completely wipes out the projected ‘fiscal hole’ and, on the official forecasts, leaves the Government with an additional £14bn to spend against its own debt targets by 2027”.
Tax rises during a cost of living crisis are understandably making earners nervous, as households already struggle to make ends meet. Food and energy prices, as well as rents and mortgages, have all gone up significantly this autumn, and inflation has reached 12%.
But it is perhaps cuts to public spending that are causing real concern – not least because they follow a decade of austerity policies that have already seen real-term spending cuts across the board.
“Austerity 2.0 would be a disaster for all of us and no more so than the women, disabled people, children, and people from ethnic minority backgrounds who rely most on public services,” said Dr Mary-Ann Stephenson, Director of the Women’s Budget Group. “It would also wind back the clock on women’s economic equality.”
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Education, Education, Education
Already, Government ministers are urging the Chancellor not to make any real-terms cuts to the education budget.
Former Education Secretary Kit Malthouse, his entire ministerial team, 14 junior ministers and six other former Cabinet ministers signed a letter saying “we believe it would be indefensible to cut education funding. On the contrary, we would urge you to invest more in the schools budget, particularly given the impact of the pandemic on children and their education”.
The Government had pledged that by the next election (due in 2024) it would restore school funding to its 2010 level in real terms. That should be enough to tell you the scale of real-terms spending cuts over the past 12 years, but here’s another figure: school spending per pupil fell 9% between 2009-10 and 2019-20, adjusted for inflation.
Schools are also expected to fund a pay rise for teachers, along with increasing energy bills, despite their budgets not having increased. Even with the increase, teaching salaries remain 12% lower in real-terms than in 2010.
Keep It Local
Grants to local governments from the central government were cut by an average of 49% in England between 2010 and 2017. This has had a huge impact on local services, which in turn have had an impact on people’s health and wellbeing.
While some local government services are statutory, such as child protection, councils have been forced to make cuts to everything from parks budgets to domestic abuse services, smoking cessation support, and drug and alcohol interventions, in order to balance the books.
A study by University of Manchester health economists found that local government spending cuts are associated with worse multi-morbidity and health-related quality of life.
One of the major knock-on effects of funding cuts to local governments has been on social care, which in turn leads to ‘bed blocking’ in NHS hospitals – where patients are well enough to leave the ward, but have no care provision to go home to.
At the same time, councils can only afford to pay carers poverty wages, fuelling a staffing crisis. Figures published in the Guardian this week found that up to one in three hospital beds were occupied by patients fit for discharge.
National Health Crisis
Cuts to local government funding are just part of the picture when it comes to pressure on healthcare. The NHS has endured a decade of austerity: the annual increases to Government spending on health fell to less than 1% under 2010’s Coalition Government, before creeping up to just under 2% before 2019 – compared to 6% annual increases under Labour. The spend did increase during the pandemic.
The results of financial pressures on the NHS have been well documented by this newspaper, and can be seen in record long waiting lists, missed A&E waiting times targets, missed targets on cancer screening as well as cancer treatments, and a decimated workforce set to go on strike.
The Coalition and subsequent Conservative Governments that have been in power since 2010 instigated a range of austerity measures that impacted people on benefits, including the benefits cap, cuts to child tax credits, means-testing child benefit, the bedroom tax, and the introduction of Universal Credit.
The cuts and changes removed up to £14 billion from the welfare system since 2010, according to the New Economics Foundation (NEF) – a figure that would have been reduced to £7 billion if last year the Government had maintained the £20 Universal Credit uplift. It did not.
The NEF analysis was published before the cost of living crisis really started to bite, but it already found that the poorest 20% of households, both in or out of work, would be £750 a year (6%) worse off in April 2022 than they would have been back in 2010. If the Coalition Government had maintained the system it inherited, there would have been 1.5 million fewer people in poverty. Currently, four million children are in poverty.
Jeremy Hunt has insisted that the most vulnerable will be protected in the cost of living crisis.
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Water Water Everywhere and Not a Drop to Swim In
This year has been dogged by stories of sewage being pumped into rivers and beaches, and this was nothing new. According to an analysis published by the Guardian, water companies discharged sewage into rivers on 292,000 occasions in 2019, and over 400,000 times in 2020.
But while our rivers and seas fill with sewage, the Environment Agency has had its budgets cut, with austerity measures meaning that in real terms it has half the amount to spend on environmental protection than it did a decade ago.
Grants provided to the EA by the Department for Environment, Food and Rural Affairs have shrunk: in the latest budget, the grant was 56% lower than in 2009/10.
The cuts have made it harder for the Agency to carry out vital work on river and air pollution, as well as flood defences, prosecuting waste criminals, and sanctioning companies.
Now, as we face Austerity 2.0, the question remains: what is left to cut?
Government spending on public services as a share of GDP decreased from 47% in 2010 to 40% in 2019. There’s not much fat left to trim, and the real life consequences of austerity are already being felt by the vulnerable, by our councils, our NHS and our environment all too harshly.